07/20/2013 02:17 EDT

Darren Entwistle, Telus CEO, Seriously Worried About Verizon's Possible Move Into Canada


Canada’s big telecom firms are lining up against Verizon’s possible entrance into the Canadian wireless market, with Telus’ chief executive warning of a “bloodbath” in the industry if the U.S. company gains access to Canada under rules meant for “new entrants.”

But critics say big telecom’s warnings about Verizon coming to Canada’s big telecom are simply meant to keep competition out of the market.

Telus CEO Darren Entwistle told the National Post the government’s plan to have four large wireless companies operating in all of Canada’s regions would lead to overspending by wireless companies and would put into doubt future investment for services to rural communities.

In a separate interview with the Globe and Mail, Entwistle said Verizon — the U.S.'s largest wireless company — shouldn’t be given the same advantages that small wireless entrants like Mobilicity, Public Mobile and Wind enjoy.

“All we are asking for is not to be punished. And if we are going to compete against foreign entrants such as Verizon, we feel we have earned the right to a level playing field by the investments that we have made in this country,” he said.

Speculation that Verizon could position itself as Canada’s fourth major wireless provider has been building for months, following news reports that the company offered $700 million for Wind Mobile, on top of reports it may be interested in buying Mobilicity as well.

But Verizon’s chief financial officer, Francis Shammo, said earlier this week the company’s interest in Canada, at least for the moment, is an “exploratory exercise.”

He did note, however, that an expansion into central Canada, at least, would fit well with the company’s overall plans.

A defining moment for the future shape of Canada’s telecom industry is approaching. In January of next year, the federal government will auction off the 700 mHz radio frequency band, a coveted prize for wireless companies because of the strength of signals carried on that bandwidth. (It became available after TV signals in Canada were switched to digital.)

The federal government has set out rules to ensure that the small wireless players won’t be pushed out of the market. It limits the big players to one block of bandwidth each, while allowing each of the small players to bid on two blocks, out of a total of four available.

But Entwistle says those rules shouldn’t apply to Verizon. If the U.S. company were to buy one of Canada’s small players, it could in theory buy half the spectrum and leave the other three telecoms fighting over the remaining half.

“That’s not a level playing field where they get to buy two times as much spectrum,” Entwistle said, as quoted at the Globe. Entwistle is pressuring the government to quickly change the spectrum auction rules ahead of a September deadline for submitting deposits for the auction.

Some market observers say Enstwistle's argument is misleading.

While the companies frame their arguments around level playing fields, the real goal is simply to keep competition out of the country,” tech law expert Michael Geist blogged.

Geist said the spectrum set-aside is the only way for a fourth major player to establish itself in Canada. Eliminating the set-aside “would kill the government's stated goal of a viable fourth carrier, since there would be little reason for Verizon to enter the country only to face many of the same disadvantages that has hamstrung the smaller new entrants.”

Telus has been at the forefront recently of Canada’s contentious debate over the telecom industry.

In a blog posting that generated a lot of attention, the company’s senior VP for regulatory affairs, Ted Woodhead, suggested that “Canada really SHOULD be the most expensive country for wireless service in the OECD, but we’re not. That’s a great success story we should be celebrating.”

Woodhead suggested that because of Canada’s large land area and sparse population, costs here should be higher than in other developed countries.

Critics, including Geist and consumer advocacy group OpenMedia, suggested Woodhead was overstating the case. They argue Canada actually does pay some of the highest wireless rates in the world.

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